In Depth

It’s taking some time to see just what the effects of a relatively new executive order will be on state agencies, such
as the Indiana Department of Environmental Management, and the Hoosiers affected by those agencies’ work. On Jan. 14,
one of Gov. Mike Pence’s first actions was to sign Executive Order 13-03 which placed a moratorium on the promulgation
of any new administrative rules by Indiana’s agencies. Gov. Pence believes the moratorium will free the Office of Management
and Budget from the burden of reviewing new rules and give it more time to examine existing regulations to determine which
rules impose unnecessary and burdensome costs on Indiana business owners and, therefore, hinder job creation. As a follow-up
to his moratorium, Gov. Pence introduced his “Cut Red Tape” initiative with a new website in July. The website
– www.in.gov/cutredtape – solicits suggestions about which regulations should be simplified or eliminated. Hoosiers
are asked which regulations they consider “most burdensome.” Their suggestions are sent directly to OMB staff
members.

There are certain exceptions to the moratorium, such as rules which the agency had announced an intent to adopt before the
moratorium took effect on Jan. 14, as well as rules which:

• are related to job creation;

• repeal existing rules;

• reduce state spending;

• reduce agency waste;

• are emergency rules; or

• those necessary to implement federal or court mandates.

If an agency wishes to promulgate a rule within one of these exceptions, it must notify the OMB that it is promulgating the
rule under the exception – and presumably satisfy the OMB that such promulgation is necessary.

In February, a document was circulated to agencies notifying them how to proceed under the moratorium. If an agency believes
that it needs to promulgate a rule, and it fits one of the exceptions listed in the moratorium, its head must submit a written
request via email to the OMB director including the reasons why the proposed rule fits an exception. The OMB director will
review the request and make a written determination of whether an exception applies and if the rulemaking may go forward.
If the OMB director determines that an exception does not apply, the rulemaking is officially suspended. The document doesn’t
discuss how an agency may proceed if it strongly disagrees with the OMB director’s assessment. Only after the OMB determines
an exception applies may the agency file a notice of intent to adopt a rule and proceed under Indiana Code 4-22. It appears
the moratorium is actually building an additional layer into the rulemaking process for agencies by making the OMB director
a “gatekeeper” to determine whether rules meet the governor’s exceptions necessary for good government.
The document does not specify any time limits or deadlines by which the OMB must make a determination.

Even before Gov. Pence signed the moratorium, Indiana legislators had addressed a need to constantly review regulations to
ensure that stale, inapplicable rules didn’t remain on the books. Under Indiana law, many administrative rules expire
seven years after they take effect. (IC 4-22-2.5-2). Certain rules necessary for federal approval of programs delegated under
federal law don’t expire, but must still be readopted after seven years. (IC 4-22-2.5-1.1). A few subcategories of rules
are excepted from expiration. (IC 4-22-2.5-1). When rules are readopted, agencies must go through the full rulemaking process.
(IC 4-22-2.5-3). The rulemaking process includes a review in which the agency must consider other alternatives that are less
“costly” or “intrusive” including whether there is even a continued need for the rule. (IC 4-22-2.5-3.1).
The public has an opportunity to comment during this procedure. This “sunsetting” policy where rules must be readopted
ensures that agencies are constantly reviewing (at least on a seven-year cycle) whether rules are necessary and what effect
these rules might have on small businesses.

Gov. Pence’s moratorium doesn’t address how the OMB’s review of all existing regulations will proceed in
light of the statutory sunsetting provisions. Many agencies, such as the Indiana Department of Environmental Management, are
required to promulgate rules to maintain their “delegated” status under various federal laws such as the Clean
Air Act and Clean Water Act. Since any rules passed by such agencies to comply with federal law fit one of the moratorium’s
exceptions – presumably the OMB will approve such promulgation. However, seeking such permission and determination adds
additional time to the already lengthy rulemaking process. When these agencies must also readopt rules – and follow
the same time-added process – they’re likely facing an additional demand on resources that are already spread
thin by reduced budgets.

State Budget Director Chris Atkins stated in June that notices of intent to file new rules had drastically dropped in the
first part of 2013, compared to the same time period in 2012.

Although the public has always had an opportunity to comment on proposed rulemaking and readoptions, Gov. Pence has provided
an additional opportunity for any regulated entity, such as a business with environmental emissions, to vent its frustrations
and to suggest which regulations should be reviewed first by the OMB.

But, eight months after signing the moratorium, it is still unclear what effect the governor’s order will have on simplifying
Indiana’s regulatory systems in light of existing statutory safeguards against stale, outdated and burdensome rules.
It is also unclear how the OMB will cope with its ordinary job of reviewing pending regulations that are excluded from the
moratorium while reviewing the approximately 11,000 pages of existing regulations and how it will juggle the suggestions coming
in from the “Cut Red Tape” website. The environmental legal community will be closely watching to see how these
uncertainties are clarified.•

__________

Amy Romig is a partner at Indianapolis-based Plews Shadley Racher & Braun LLP, who focuses on environmental law. She
can be reached by email at aromig@psrb.com or by calling 317-637-0700. More information about Amy is available at www.psrb.com.

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